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IN THE HIGH COURT OF JUDICATURE AT MADRAS
SANJAY KISHAN KAUL, R.MAHADEVAN, JJ.
T.T.V. Dhinakaran – Appellant
Vs.
Special Director, Enforcement Directorate – Respondent
C.M.A.No.914 of 2000
Decided On : 06-01-2017
Foreign Exchange Regulation Act, 1973 - Sections 8(1), 9(1)(a) , 14 , 50 and 51 , 52(4) and 53 - Foreign Exchange and Prevention of Smuggling Activities Act - Companies Act - Section 3(1) - Dealer in foreign exchange - Without general or special permission - Charged - Appellant guilty on all counts in respect of alleged transactions, but authority reduced amount involved in charge and imposed a penalty of Rs.25 crores for first and second charges, Rs.2.5 crores each for third and fourth charges respectively and again a cumulative penalty of Rs.1 crore for the last charge - Reduction of the amount involved in charge was made for reason that material on record does not however, categorically bring out that other monies included in enclosure to Barclays Banks letter dated were also credited to Dipper Investment Account - Foreign Exchange Regulation Appellate Board (“appellate authority” in short), upon hearing oral submissions made on both sides, asked parties to mutually discuss feasibility of moving Supreme Court to obtain an early disposal of appeal pending in that Court against judgment of this Court in HCP No. that had been brought to notice of Board by respondent - A suggestion was also put to them that, in alternative, they may consider feasibility of obtaining an appropriate direction from Supreme Court – Held, In this regard, appellate authority after analysing the matter in detail and also considering evidence placed on record came to conclusion that name of company Dipper Investments Limited was used for obtaining bank drafts, opening an account in Barclays Bank and for crediting amount of drafts in that account and transferring the funds so credited to accounts of Meer Care & Desai, West back Ltd., and Bank of Ireland - With regard to plea that funds in name of company belong to company only and Directors of company are not owners of such funds and that order challenged before appellate authority has been made on basic misconception in failing to distinguish between the company as a legal entity and character and capacity of Directors of company, it has been held by appellate authority that what appellant has assumed as Departments case in show-cause notice is only a narration of transactions, as appearing on the face of the documentary evidence, - In view of clear finding given by appellate authority that various acts done in name of company could not be attributed to the company and that there is no evidence that these were done in course of companys business, it is clear that appellant is legally liable for those acts - Accordingly, fourth and final question of law is answered against appellant - Civil Miscellaneous Appeal stands dismissed.
R. MAHADEVAN, J.
This appeal has been filed challenging the order dated 05.05.2000 made in Appeal No.51/98 on the file of the Foreign Exchange Regulation Appellate Board, Ministry of Law, Justice and Company Affairs, New Delhi.
2. The facts leading to the filing of this appeal are as under:
(i) Originally, a total penalty of Rs.31 Crores has been imposed on the appellant for contraventions of the provisions of Sections 8(1), 9(1)(a) and 14 of the Foreign Exchange Regulation Act, 1973 (“FERA” in short), by way of an adjudication order passed by the Special Director, Enforcement Directorate (Foreign Exchange Regulation Act), New Delhi, the respondent herein, in Order No.SDE(APK)/111/03/98 dated 06.02.1998. This adjudication order was passed following the issue of show-cause notice T-4/26-D/95/(SCN-VIII) dated 29.01.1996. In addition to the imposition of a penalty of Rs.31 crores, the appellant was directed to repatriate to India and offer for sale to an authorised dealer in India, the foreign exchange amounting to USD 62,61,313/- held by him outside India together with interest and any other income that might have accrued thereon.
(ii) The said show-cause notice was issued on the allegations that a person resident in India other than an authorised dealer in foreign exchange, without the general or special permission of the Reserve Bank of India -
(a) other wise acquired foreign exchange totaling to USD 1,04,93,313/- from persons other than authorised dealer in foreign exchange and thereby contravening the provisions of Section 8(1) of the FERA;
(b) deposited the said foreign exchange amount of USD.1,04,93,313/- in the current account No.3001-8937 of M/s. Dipper Investments Ltd., a company incorporated in the British Virgin Islands, with Barclays Bank, Sutton, United Kingdom and thereby lent the said foreign exchange to a person not being authorised dealer, thus violating Section 8(1) of the FERA.
(c) made payments totalling to USD 1,04,93,313/- to the credit of Dipper Investments Limited, a person resident outside India thereby contravening the provisions of Section 9(1)(a) of the FERA;
(d) owned the said amount of USD 1,04,93,313/- but failed to offer it for sale or cause it to be offered for sale to an authorised dealer in foreign exchange in India within three months from the date of his becoming owner thereof, and thereby contravening the provisions of Section 14 of the Act r/w Central Government's Notifications dated 15.06.1977 (GSR 839) and 06.07.1978 (GSR 996) as amended;
(e) transferred and also made payments of foreign exchange of Pound Sterling 43,23,557/- to M/s. Meer, Care and Desai, Pound Sterling 90,000/- to M/s. West back Limited and Pound Sterling 23,685.90 to an undisclosed account in the Bank of Ireland thereby contravening the provisions of Sections 8(1) and 9(1)(a) of the FERA.
(iii) The adjudicating authority found the appellant guilty on all counts in respect of the alleged transactions, but the authority reduced the amount involved in the charge, ie., USD 1,04,93,313/- to USD 62,61,313/- and imposed a penalty of Rs.25 crores for the first and second charges, Rs.2.5 crores each for the third and fourth charges respectively, and again a cumulative penalty of Rs.1 crore for the last charge. The reduction of the amount involved in the charge to USD 62,61,313/- was made for the reason that the material on record does not however, categorically bring out that the other monies included in the enclosure to Barclays Bank's letter dated 04.08.1994 were also credited to Dipper Investment Account.
(iv) Being aggrieved against the order imposing penalties as stated supra, the appellant filed an appeal before the Foreign Exchange Regulation Appellate Board, New Delhi. The appellant also filed a petition for dispensing with pre-deposit of the penalty.
3. (i) The Foreign Exchange Regulation Appellate Board (“appellate authority” in short), upon hearing the oral submissions made on both sides, asked the parties to mutually d
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